counterparts say Asia ex-Japan equities can see more earnings downgrades amid weak macro and industrial data. expect 20% downside for European earnings per share by mid-2023, while Goldman Sachs Group Inc. The bank’s earnings-revisions index shows downgrades outweighing upgrades for the US, Europe and the world, with the US seeing the deepest downgrades. Strategists at Bank of America Corp. Morgan Stanley strategists warned about cash flow ‘havoc’, while Citigroup strategists expect a 5% contraction in global earnings for 2023, consistent with below-trend global economic growth and elevated inflation. The index currently trades at about 16 times forward earnings, below the average for the last decade. Of those, some 70% expect the S&P 500’s price-to-earnings ratio to fall to the 2020 low of 14, while a quarter see it tumbling to the 2008 low of 10. “I’m expecting more cautious and negative guidance on the basis of broad economic weakness and uncertainty and tighter monetary policy,” said James Athey, investment director at abrdn.Ībout half of poll respondents see equities valuations deteriorating further in the next few months. Only 11% of participants said they expect chief executive officers to utter the word “confidence,” underscoring the gloomy backdrop. Survey respondents expect that references to inflation and recession will dominate earnings calls this season. The balanced 60/40 portfolio mixing stocks and bonds in an attempt to protect against strong moves in the markets either way has lost more than 20% so far this year.
US stocks have had an awful year, but so have other financial assets, from Treasuries to corporate bonds to crypto. Still, 37% chose neither of those categories, perhaps reflecting Citigroup quantitative strategists’ view that equity markets have “turned decidedly defensive” and are only just starting to reflect the risks of a recession. Against that grim backdrop, almost 40% of survey participants are inclined to invest more in value stocks, compared with 23% for growth, the earnings outlook for which is vulnerable when interest rates rise. The reporting stretch kicks off with the S&P 500 down 24% this year, on pace for its worst performance since the Great Financial Crisis. JPMorgan garnered the second-biggest mention, at 25%, but Microsoft Corp. The iPhone maker, which has the heaviest weighting on the S&P 500, will provide insight into an array of key themes, such as consumer demand, supply chains, the effect of the soaring greenback and higher rates. and Citigroup Inc., set to give investors a chance to hear from some of Corporate America’s most influential leaders. US equity index futures ticked down on Monday.Īs for stocks to watch in the next few weeks, 60% of survey takers see Apple as crucial. The US earnings season starts in earnest this week with results from major banks, including JPMorgan Chase & Co. “The key risks to third-quarter earnings are the cost-of-living crisis impacting demand for consumer products” and higher wages eating into companies’ profits. “Third-quarter earnings will disappoint with clear downside risks to fourth-quarter analyst estimates,” said Peter Garnry, head of equity strategy at Saxo Bank A/S. Data on Friday showed that the US labor market remains strong, increasing the chances of another jumbo Fed rate hike next month. The outlook isn’t likely to improve any time soon with the Federal Reserve steadfast on hiking rates, likely weighing on growth and profits in the process. The results underscore Wall Street’s fear that even after this year’s brutal selloff, stocks have yet to price in all the risks stemming from central banks’ aggressive tightening as inflation remains stubbornly high. That means no end in sight to the dismal run for stocks, after a tumble Friday decisively dashed hopes that the eye-popping two-day rally early last week would be the start of something bigger. About half of poll participants also expect equity valuations to pull back even further from their average of the past decade. More than 60% of the 724 respondents to the latest MLIV Pulse survey say this earnings season will push the S&P 500 Index lower. in particular as a bellwether of global economic conditions. (Bloomberg) - Investors expect this earnings season to pummel stocks further and will watch Apple Inc.
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